We release our Citizenship Report at the same time as our Annual Financial Report to give our broad base of stakeholders a full view of Microsoft’s financial and non-financial performance. Corporate responsibility means more than returning value to shareholders – it means engaging with stakeholders to address our responsibilities in the areas of environmental, social and governance issues. We believe all corporations have, as part of their license to operate, a responsibility to contribute positively to society on a global scale. To quote our company’s founder, Bill Gates: "It takes more than great products to make a great company."

So let's just take a look at the things Microsoft has been doing to "contribute positively to society on a global scale". Here's one detail:

We have increased corporate charitable giving year-over-year since fiscal year 2008, despite economic challenges. Our employees volunteered more time—more than 380,000 hours in the U.S. alone. We also contributed more cash and in-kind support to nonprofits—$949 million globally.

In FY2011 we donated more than $844 million in software to 46,886 nonprofits in 113 countries/regions.The value of software we have donated globally since 1998 is more than $3.9 billion. The FY2011 value of software donated now includes employee software donations; previous years’ in-kind giving numbers do not.

This means that of the $949 million dollars "contributed" to nonprofits, $844 million -- 88% – was actually software, presumably Microsoft's, since it's unlikely it went out and bought it from competitors.

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.

Now, I'm not suggesting that the people who put up the web page about Microsoft's contributions to nonprofits were following that definition exactly. But equally, it seems likely that the gist is the same: it's a kind of rough price that you'd usually find in normal markets selling the products in question. And those prices are almost certainly well above the cost of manufacturing, especially if the software was delivered online, or if multiple installations were permitted.

So the actual cost to Microsoft of that donated software is likely to be only a small fraction of the $844 million "fair market value" cited. This inevitably tempers our admiration for Microsoft's ten-figure generosity somewhat.

But there's something else. Microsoft wasn't just handing out a bunch of any old products: it was giving away mostly Windows and Office, judging by a table showing a breakdown by region. Both of these are well-known for the lock-in effects they produce: once you start installing applications and creating documents with them, it's quite hard to move to a completely different platform like Apple or GNU/Linux. Most people don't even try.

So these free copies not only cost Microsoft considerably less than the $844 million figure it used to calculate that near-billion dollar total for its corporate brochure, but it wasn't really altruistic at all. With hundreds of thousands of copies of Windows being distributed (417,030 were supplied for refurbished computers alone), there is a very high probability that Microsoft will be benefiting financially – and not just in terms of goodwill -- from upgrades and follow-on sales for many years to come.

Making copies available at zero or very low prices is something that Microsoft has done time and again whenever there was any danger of customers "defecting" to open source. For example, in 2009, Russia planned to deploy free software throughout its education system. That didn't happen, in part because Microsoft offered to license Windows for $30 a copy (article in Russian.) It's part of the rough and tumble of the highly-competitive software business.

Still, it's a little rich for a company as profitable as Microsoft to try to dress this up as “corporate charitable giving.” It's really nothing of the kind: it's marketing, pure and simple, and Microsoft should be big enough to describe it as such.

from the questions-that-need-to-be-asked dept

Really not sure what to make of this. A typical patent trolling type organization named Azure Networks filed two separate lawsuits right before Christmas, against a bunch of semiconductor companies, including Texas Instruments, Freescale, Atmel, Alereon, Samsung, Synopsis and others. At first glance, these lawsuits seem pretty typical: filed in Eastern Texas, filed by a small company whose only purpose is to sue, suing a bunch of big tech companies who actually do something. It meets all the standard checkmarks of these types of lawsuits.

But some folks have noticed one oddity: named as co-plaintiff along with Azure Networks is a local Texas charity. The Tri-County Excelsior Foundation is named as a plaintiff, with a note that it is a non-profit corporation that is "a supporting organization" to a charity called Casa of Harrison County. Casa of Harrison County appears to be a perfectly admirable charity -- based in Marshall Texas -- focused on training "community volunteers to be advocates for abused and neglected children in the custody of Child Protective Services."

So why are they a co-plaintiff in the lawsuit? That's not clear at all. I've embedded one of the two lawsuits below. It says that Tri-County Excelsior Foundation is a plaintiff, but does not explain its relationship to the patent. The filing does say that Azure has a license on the patent, but does not say from whom. The patent in question (7,020,501) lists BBNT Solutions LLC as the assignee, but it's possible that the patent has since been handed off to others.

I have no idea if the patent is valid or not. I have no idea if the companies are infringing or not. But it does seem... odd, to see a non-profit charity supposedly focused on helping abused children, somehow getting involved in a typical patent trolling lawsuit.

from the for-the-cure dept

A few months back we had a few submissions over some claims by the "Susan G. Komen for the Cure" operation was being a trademark bully, and threatening other charities that were using the color pink. SGK is the big name in raising money for breast cancer research, but a new article highlights how it's also spending over a million dollars a year being a trademark bully: specifically going after anyone else who uses the phrase "for the cure" or "for a cure" as part of their own charitable fundraising. The organization claims that it "needs" to do this to protect its trademark, but as we've pointed out time and time again, that's simply not true. First, you could argue that raising money for charity is not "use in commerce" and thus not deserving of a trademark. On top of that, the phrase "for the cure" certainly sounds descriptive, and again perhaps doesn't deserve a trademark

But, even assuming that the trademark itself is valid, there are all sorts of ways it could deal with other charities using that phrase without acting like a legal bully. It could simply agree to license the mark at no cost to other legitimate charities. SGK's claim, of course, is that it doesn't want the phrase to get sullied by unscrupulous organizations, but that doesn't mean it needs to pull out the legal guns when a legitimate charity comes along. Just let them use the damn phrase, and let everyone help raise money for charity, rather than legal bills.

from the long-term-vs.-short-term dept

A few weeks back, the always excellent Planet Money podcast played parts of a debate held at the Clinton Global Initiative between famed microfinance guru Muhammad Yunus and successful microfinance entrepreneur Vikram Akula (moderated by Planet Money host Adam Davidson), considering whether or not a for-profit microfinance effort can really work in terms of enabling better financial opportunities for the poor. Yunus argued that a for-profit effort simply cannot do good. Since it has a profit motive and outside investors, its efforts will always be on transferring money away from the poor to those investors.

Akula disagreed, strongly, by pointing out that you can align both of their interests, and his company appears to have successfully done so. In the talk, he gives an example of the fact that they only lend money to women and they charge well-below market interest rates. He also notes that, unlike most banks, they don't pay those in charge of lending the money based on how much money they lend out (or make). The idea there, is that they want the people there to figure out the right amount that the person needs, rather than creating incentives for them to try to get the person to take more, to make their own numbers look good.

Now, he argues that, compared to other banks, you could say that his firm, SKS Microfinance, is leaving money on the table, but he doesn't see it that way. The woman who takes out a small loan and successfully pays it back this time, can come back later, when the timing is appropriate and take out a larger loan, which might never have happened if she had been pushed into a bigger loan earlier, or charged much higher interest rates.

And, while no one specifically says it in the podcast, this is a much bigger point than Yunnus seems to recognize. There are two factors that Yunnus doesn't seem to consider in condemning all for-profit microfinance efforts: (1) this is a non-zero sum game and (2) this is a multi-round game (i.e., there's a long-term strategy horizon). Yunnus is right that for-profit charities probably can't work in a situation that is a zero sum game, or in which the time horizon is very short, such that there are unlikely to be repeat customers. But, just taking a straightforward game theory look at what Akula and SKS are seeing, they can increase the overall pie more efficiently in a for-profit setup. It's not "taking away" from the poor. It's expanding the overall economic pie for everyone, including investors, and part of the way that's done is by focusing on building strong relationships with those using the service. That means, the temptation to screw them over is tempered by the incentives to be fair to encourage that long-term relationship that pays off (for everyone) over the life of the relationship.

I have to admit that I was a bit disappointed in Yunus, who is so often held up as a financial genius for his microfinance theories. As the podcast makes clear, his focus involves heavy government involvement and regulation to create a special type of community-owned microfinance bank, which apparently works okay for the community he's in, in Bangladesh, but that doesn't mean that a for-profit microfinance operation can't help the poor quite a lot, while also helping investors.

from the promoting-progress-all-around dept

Rob H was the first of a few of you to send in the story of how a music publishing company, Bourne Music Publishers, threatened 10 year-old actress Bethany Hare, for creating a short video of her acting as Charlie Chaplin accompanied by her singing the song Smile, which was the theme for Chaplin's 1936 film Modern Times. Hale had created the video and posted it to the charity site JustGiving as part of a campaign to raise money for a hospice. Modern times indeed. Of course, when Chaplin wrote the song, he was given a government-granted monopoly that he knew would put his work in the public domain by now. Until the government and lobbyists extended copyright again and again and again.

Either way, Bourne Music Publishers apparently doesn't care much for charity. It demanded $2,000, plus another $200 every time she performed the song. That certainly would take away from the hospice that she was trying to raise money for, so now her Chaplin appreciation film is a Chaplin-style silent film instead.

from the empirical-research dept

We've talked a lot about different types of business models with "pay what you want" being a popular one that comes up often. I still think there are some problems with it, but there's growing evidence that it can work very well. When Radiohead got a ton of attention for using it, the band made more from the digital "donations" than any of its previous albums' digital releases -- even though plenty of people still chose to pay nothing, and the average price was a lot lower than standard. But average price is kind of meaningless when judging the success of such a program. It's really the net that matters, and on that front, Radiohead did quite well.

We've seen the general model work elsewhere as well. A taxi driver had some success with it, as have many musicians who have used it with merchandise at shows. Even Panera Bread is testing it out. Earlier this year, there was a lot of attention paid to the really, really successful story of the Humble Indie Bundle that did pay what you want for a group of video games. That had an added component as well. Some portion of what you paid could be designated to go to specific charities (EFF and Child's Play).

It seems that the folks behind the Humble Indie Bundle are on to something.

What's amazing is that the fourth one was the best one in terms of the net amount to the seller (yes, after giving the portion to charity). Sales were much higher and the net dollar amount to the seller was much higher than the straight "pay what you want."

Specifically, when people were asked to pay the flat price of $12.95, only 0.5% did. The $12.95 price, where half went to charity, barely increased the number of buyers. Then only 0.57% of people bought, and (obviously) after the charities cut was taken out, the net was way down. If it was pure "pay what you want," a lot more people bought: 8.4%, but the amount was much, much lower (average: $0.92). In terms of overall revenue, the gross is up, but the net definitely depends on the cost of the photos. If there's no marginal cost, then net revenue would go up as well (what Radiohead found). But in the final scenario, where it was pay what you want, but half went to charity, the overall reaction was the highest. 4.5% bought, and the average price was $5.33. Even when you take out the half going to charity, the revenue is much, much higher.

Now, there are a few caveats I can think of here. The $12.95 price appears to be pretty high. It's entirely possible that there could be another, lower, price that would do a better job maximizing profits. Perhaps at $5, the results would be somewhat different. So I'd definitely like to see more research done with different pricing points. Separate from that, I also find it... odd, that the yield rate when charity is added to pay what you want seems to be almost half of the pure pay what you want. Perhaps I'm missing something, but I can't see how that makes much sense. The "cost" to the user is the same, effectively, and clearly a lot of people value it a lot more. But nearly half don't value it at all? That seems... odd. Perhaps there are some more details that are missing from the summary of the study.

Overall, though, a fascinating experiment that shows how helping a charity can not just be good for the charity, but can also maximize your own efforts. Just don't tell that to the financial columnist who thinks charitable lemonade stands are destroying America.

from the stack-those-children-up dept

Tom Kintop was the first of a few of you to send in the news that LEGO, makers of the plastic bricks -- and rather well known for its overly aggressive intellectual property enforcement attempts, which often get shot down -- has sued a small non-profit organization in Minneapolis called Project Legos, where the Legos stands for Leadership, Empowerment, Growth, Opportunity, Sustainability. While both are targeted at children, it's hard to see that the two compete in any way in the same "market." It's difficult to see how there's any confusion here, or how it does LEGO any good suing a small charitable organization. They should send over some LEGO bricks and apologize.

from the uncle-scrooge dept

Just in time for the holiday season, SteveD alerts us to the news that PPL, Phonographic Performance Limited -- a separate UK licensing group, which collects for performers and producers (unlike PRS, which is for songwriters/record companies) -- is pushing forward with demands for charity shops to pay up for a license on top of the license they already pay PRS. In the past, the UK government exempted charities from having to pay the PPL license, but they've now removed that exemption, and like so many music collections societies, PPL didn't bother to consider how it would look to shake down charity shops, and apparently just drove forward with plans. Nice of them. This is what happens, of course, when you create the statutory ability to shake down anyone who plays music. That right just expands more and more, and the musicians and songwriters never have to actually give people a reason to buy: they just sit back and collect.

from the not-so-superfreaky dept

With the follow-up to Freakonomics coming out, as part of the plan to promote SuperFreakonomics, the books' authors are auctioning off the very 1st printed copy on eBay for charity. The winner of the auction gets a signed copy of this book, as well as a verification letter and a limited-edition SuperFreak t-shirt. Clearly, the economists behind this offer understand the value of scarce goods, and they've tried to increase that value with a couple extra goodies (as well as a matching donation up to $5,000 from Stephen Dubner). But wouldn't it be more interesting to see additional "reasons to buy" around the content, along with typical "freakonomic" analysis of what works and why? Dubner has already suggested (tongue-in-cheek) that the winner won't suffer from winner's curse, but will there be more practical lessons to be learned from this auction? How would the results of this charity auction be different if it did a Dutch auction (like xkcd did recently)? Auctioning off another copy of the book without the charity aspect would be an interesting test, too. And are there other scarce items that Stephen Dubner or Steven Levitt could offer for their book sales?

from the who-needs-tickets dept

Ticketmaster helped build its consumer-unfriendly reputation even more earlier this year, when news emerged that it was collaborating with some musicians and concert promoters to try and push scalpers aside -- and grab their revenues. Scalping's back in the news again this week, but with a slightly different twist: a number of musicians are working with a company called Charity Partners to sell some tickets to their shows at scalper-like prices, then donate the revenues over face value to charity. It's definitely an interesting idea that seeks to do something positive with the excess willingness to pay for certain concert tickets over their face value, rather than let it go to scalpers -- or back into the pockets of the artists and promoters themselves. But will the charity aspect be enough to deflect criticism that this is just another way for musicians to fleece their fans?